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Perhaps for businesses this may be true. It's hard to imagine for a consumer. I'm not going to delay the purchase of groceries, a fridge, a new roof or (if I'm

Perhaps for businesses this may be true. It's hard to imagine for a consumer. I'm not going to delay the purchase of groceries, a fridge, a new roof or (if I'm feeling rich) a new car just because they may be 3% cheaper next year. I'm not saying this conventional wisdom is wrong, but it's not obviously right.

nativespecies 4y ago
I wouldn't underestimate peoples' want (or need) to save extra money right now. Most working people will do anything they can to save in this economy.
TremendousJudge 4y ago
Yes, that's exactly why deflation is bad for the average person. You can't afford to save your money (which is increasing in value just sitting there) because you HAVE to spend it on food, rent, etc. People who can afford to, don't spend their money and they get nominally richer. Anything you buy will decrease in value, so people tend to avoid it. This isn't hypothetical, it has happened every time there's deflation in an economy. It widens the gap between the rich and poor.
christophilus 4y ago
Generally speaking, periods of deflation are a symptom of an existing economic malaise. Prices might drop because of solid gains in efficiency, but they generally drop because of a loss of demand. That loss of demand is generally caused by economic hardship. Therefore, deflation is correlated with economic hardship, but I think it's a correlation, not a causation. So, I'm with you. I've had it explained to me many times, and it still doesn't make much sense to me. I'm going to buy cars / houses / investments / goods / services when I need them and can afford them-- not based on speculation about their future prices (well, except for investments, if I have some magic insight). From a business perspective, I've been involved in many purchasing decisions and never once was "it might be cheaper or more expensive in the future" a part of the decision making process. It really feels like "deflation is bad" is an economic theory that should be tested. Yes. We've had deflationary shocks, and those were bad, but that was because a) it was a shock rather than a gradual slope and b) it usually followed a period of marked excess. I'm not convinced that deflation itself was the enemy as much as the other ancillary issues. It's hard to disentangle that, though.
- runako 4y ago
  > I'm going to buy cars / houses / investments / goods / services when I need them and can afford them-- not based on speculation about their future prices. Think about the prevalence of sales, and their impact on moving goods. If you need a TV, but the need is not urgent, you (okay, not you, but most people) might wait for the New Year's sales in a couple of weeks to save a few bucks. Same with cars and other appliances. Or people look for a coupon code to save some money. If sales and coupons make sense, consumer decision making in deflationary environments should also make sense. If you don't understand why people wait for sales to purchase things, you may want to talk to some working-class people to understand what it is like to not have enough money to buy everything you need immediately when you need it. > it was a shock Japan has been in a gradually deflating environment for decades.
runako 4y ago
> delay the purchase of groceries This will obviously not mean skipping eating, but will manifest more as fewer "special" meals like steak or lobster or whatever. > a fridge, a new roof If you are a homeowner, you know that most equipment failures are a decision to either repair or replace. In a deflationary environment, owners will bias toward patching things as long as they can. (The opposite is true in an inflationary environment.) > a new car You may be extremely fortunate. Most people would try to make it through (say) a year of public transit/rideshare/etc. if they could save (say) 8% on a car. Average price of a new car in 2022 is ~$48k; saving 8% on that is something like half a month's pay at the average American salary, which is larger than the annual raises most people get at even good jobs, even in good times. Don't underestimate the sacrifice people will make to earn another few hundred $/mo.
- wewtyflakes 4y ago
  All of those things seem okay, or even good.
  - runako 4y ago
    Health and other benefits aside, they are "bad" in the context of people don't like having those decisions forced on them.
  - notahacker 4y ago
    Until your employer informs you that due to reduced sales, your salary will be falling even faster than prices...
- ClumsyPilot 4y ago
  > owners will bias toward patching things as long as they can So if we live more sustainably, the economic system colapses? Is that a bug or a feature? I just had my landlord throw away the dishwasher because replacing the tiny pump was not worth the effort. Myfriend threw away a fridge because replacing a single part, the compressor, was not worth the trouble.
  - 4y ago
gumby 4y ago
Actually, consumers very much do delay purchases, especially of big ticket items like white goods, cars, and houses in deflationary regimes, just as in periods of hyperinflation they do the opposite. This is easy to look up as there are many examples through history (especially of the latter — Brazil is an excellent and frightening example). Groceries, sure, but then as a consumer you are still impacted because suppliers are less likely to provide the goods you want. Deflation is really bad. One of the consequences of the gold standard was the big swings (inflationary after a big gold strike, like California' Yukon, or Victoria; deflationary when the gold supply could not keep up with economic activity) that you can easily see in the second half of the 19th century.
- notahacker 4y ago
  And indeed if consumers didn't delay purchases, we wouldn't see deflation. Businesses don't collectively decide to reduce prices month after month out of generosity. They do it because the economy is in a position where none of them are selling enough at the current price. If everyone is selling less stuff at lower prices, then sooner or later the problem becomes the employees'...
  - gumby 4y ago
    Very good and strangely non-obvious point.
- tnel77 4y ago
  It’s not the same situation, but most video games I will wait a year or two to purchase. $70 day one, or $20 on Black Friday a year from now with all the DLC included?
  - listenallyall 4y ago
    It's extremely rare for inflation/deflation to reach double-digits. Would you actually wait if the price a year from now was $67 (and no extra content)?

nativespecies 4y ago

I wouldn't underestimate peoples' want (or need) to save extra money right now. Most working people will do anything they can to save in this economy.

TremendousJudge 4y ago

Yes, that's exactly why deflation is bad for the average person. You can't afford to save your money (which is increasing in value just sitting there) because you HAVE to spend it on food, rent, etc. People who can afford to, don't spend their money and they get nominally richer. Anything you buy will decrease in value, so people tend to avoid it. This isn't hypothetical, it has happened every time there's deflation in an economy. It widens the gap between the rich and poor.

christophilus 4y ago

Generally speaking, periods of deflation are a symptom of an existing economic malaise. Prices might drop because of solid gains in efficiency, but they generally drop because of a loss of demand. That loss of demand is generally caused by economic hardship. Therefore, deflation is correlated with economic hardship, but I think it's a correlation, not a causation. So, I'm with you. I've had it explained to me many times, and it still doesn't make much sense to me. I'm going to buy cars / houses / investments / goods / services when I need them and can afford them-- not based on speculation about their future prices (well, except for investments, if I have some magic insight). From a business perspective, I've been involved in many purchasing decisions and never once was "it might be cheaper or more expensive in the future" a part of the decision making process. It really feels like "deflation is bad" is an economic theory that should be tested. Yes. We've had deflationary shocks, and those were bad, but that was because a) it was a shock rather than a gradual slope and b) it usually followed a period of marked excess. I'm not convinced that deflation itself was the enemy as much as the other ancillary issues. It's hard to disentangle that, though.

runako 4y ago
> I'm going to buy cars / houses / investments / goods / services when I need them and can afford them-- not based on speculation about their future prices. Think about the prevalence of sales, and their impact on moving goods. If you need a TV, but the need is not urgent, you (okay, not you, but most people) might wait for the New Year's sales in a couple of weeks to save a few bucks. Same with cars and other appliances. Or people look for a coupon code to save some money. If sales and coupons make sense, consumer decision making in deflationary environments should also make sense. If you don't understand why people wait for sales to purchase things, you may want to talk to some working-class people to understand what it is like to not have enough money to buy everything you need immediately when you need it. > it was a shock Japan has been in a gradually deflating environment for decades.

runako 4y ago

> delay the purchase of groceries This will obviously not mean skipping eating, but will manifest more as fewer "special" meals like steak or lobster or whatever. > a fridge, a new roof If you are a homeowner, you know that most equipment failures are a decision to either repair or replace. In a deflationary environment, owners will bias toward patching things as long as they can. (The opposite is true in an inflationary environment.) > a new car You may be extremely fortunate. Most people would try to make it through (say) a year of public transit/rideshare/etc. if they could save (say) 8% on a car. Average price of a new car in 2022 is ~$48k; saving 8% on that is something like half a month's pay at the average American salary, which is larger than the annual raises most people get at even good jobs, even in good times. Don't underestimate the sacrifice people will make to earn another few hundred $/mo.

wewtyflakes 4y ago
All of those things seem okay, or even good.
- runako 4y ago
  Health and other benefits aside, they are "bad" in the context of people don't like having those decisions forced on them.
- notahacker 4y ago
  Until your employer informs you that due to reduced sales, your salary will be falling even faster than prices...
ClumsyPilot 4y ago
> owners will bias toward patching things as long as they can So if we live more sustainably, the economic system colapses? Is that a bug or a feature? I just had my landlord throw away the dishwasher because replacing the tiny pump was not worth the effort. Myfriend threw away a fridge because replacing a single part, the compressor, was not worth the trouble.
- 4y ago

gumby 4y ago

Actually, consumers very much do delay purchases, especially of big ticket items like white goods, cars, and houses in deflationary regimes, just as in periods of hyperinflation they do the opposite. This is easy to look up as there are many examples through history (especially of the latter — Brazil is an excellent and frightening example). Groceries, sure, but then as a consumer you are still impacted because suppliers are less likely to provide the goods you want. Deflation is really bad. One of the consequences of the gold standard was the big swings (inflationary after a big gold strike, like California' Yukon, or Victoria; deflationary when the gold supply could not keep up with economic activity) that you can easily see in the second half of the 19th century.

notahacker 4y ago
And indeed if consumers didn't delay purchases, we wouldn't see deflation. Businesses don't collectively decide to reduce prices month after month out of generosity. They do it because the economy is in a position where none of them are selling enough at the current price. If everyone is selling less stuff at lower prices, then sooner or later the problem becomes the employees'...
- gumby 4y ago
  Very good and strangely non-obvious point.
tnel77 4y ago
It’s not the same situation, but most video games I will wait a year or two to purchase. $70 day one, or $20 on Black Friday a year from now with all the DLC included?
- listenallyall 4y ago
  It's extremely rare for inflation/deflation to reach double-digits. Would you actually wait if the price a year from now was $67 (and no extra content)?